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We Review the NDAA Part I: Rare Earth Minerals

I’ll begin our week of pointing to important aspects of the draft National Defense Authorization Act today with Section 835 (Scribd below) which requires DOD to assess any rare earths vulnerabilities it may have.

The first thing that really stood out to me, oddly enough, was the timing of the main reporting requirement. After the NDAA is passed, if this section remains intact, the Secretary of Defense will have 180 days to complete this assessment and report results back to Congress. By comparison, Sec. 313 will require the SecDef to “submit to Congress a testing and certification plan for the operational use of a biofuel that (1) is derived from materials that do not compete with food stocks; and (2) is suitable for use for military purposes as an aviation fuel or in an aviation-fuel blend” within one year. And the Navy and Air Force have already begun testing such fuels. Seems odd that a shorter time span for reporting is reserved for the rare earths task, for which information may be more difficult to find.

Overall, I think it will be good for DOD to assess its supply chain vulnerabilities involved with rare earths. What I fear is that holding out rare earths as the only material to examine will present findings out of context. Focusing on rare earths in isolation, both from broader minerals trade and from history, may skew results – or may create unintentional blind spots.

It is worth remembering that we are 100% import dependent on other materials as well, not just rare earths. For at least 17 minerals, the United States has no domestic supplies. Rare earths mark an important case to examine given concerns over the leverage that China may exert with near-monopoly control on supply, but comparing rare earths issues against those other 16 would add better context to the study that DOD is to conduct. Doing so may point to an even stronger need to address rare earths issues, or it may highlight additional minerals and materials that warrant equal policy consideration – or both.

This country has always relied on minerals and materials imports, often to meet important military needs (see uranium early last century). Around the time of the world wars, concern grew over the things for which the United States was absolutely 100% import dependent, and a few other items critical to war needs. Thus, the advent of stockpiling and other post-war industrial policies. Like we did for uranium, this NDAA stipulates that part of the answer will be:

. . .in consultation with the United States Trade Representative, the identification of any trade practices known to the Secretary that limit the Secretary’s ability to ensure the long-term availability of such material or the ability to meet the goal of establishing domestic sources of such material by December 31, 2015.

This is a double-edged sword, however. Tightening trade relationships to get what our economy needs is generally a good thing, but we should also be under no illusions that doing so completely mitigates the ability of exporting countries to skew U.S. foreign policy priorities. Through the measures below, and in weighing policy options, I hope that those conducting the review remember to ask whether each option increases or reduces U.S. flexibility. I’d bet on domestic innovation for being the best bet, though trade deals will surely continue to be part of the solution.

Will and I are actually took a trip to a rare earths magnet manufacturing site yesterday, to put eyes on a piece of the supply chain first hand. Tomorrow, we’ll look at the NDAA’s coverage of energy, water, or whatever interesting pieces we find.